End of fiscal year: Overview, definition, and example
What is the end of a fiscal year?
The end of a fiscal year marks the conclusion of a company’s 12-month financial reporting period. This is the date on which businesses finalize their accounts, close their books, and prepare financial statements for tax, compliance, and strategic planning purposes. Unlike a calendar year, which ends on December 31, a company’s fiscal year can end on any date chosen for accounting and regulatory reasons.
For example, a company may set its fiscal year to run from April 1 to March 31, rather than following the standard January-to-December calendar year.
Why is the end of a fiscal year important?
The end of a fiscal year is crucial for financial reporting, tax filing, and business planning. It determines when a company must submit tax returns, report earnings to shareholders, and assess overall financial performance.
For businesses, setting a fiscal year that aligns with operational cycles can simplify accounting and improve financial management. For example, many retailers choose a fiscal year that ends after the holiday shopping season to get a more accurate picture of their annual performance.
Understanding the end of a fiscal year through an example
Imagine a software company with a fiscal year running from July 1 to June 30. At the end of its fiscal year on June 30, the company closes its financial books, prepares income statements, and submits tax documents based on its annual earnings.
Similarly, a nonprofit organization may set its fiscal year from October 1 to September 30 to align with grant funding cycles. This helps the organization better track revenue and expenses related to its funding sources.
An example of an end of fiscal year clause
Here’s how an end of fiscal year clause might appear in a contract:
"The Company’s fiscal year shall end on [Specified Date] each year. All financial statements, tax filings, and annual reports shall be prepared and submitted in accordance with applicable laws and accounting standards following the conclusion of the fiscal year."
Conclusion
The end of a fiscal year marks the completion of a company’s financial reporting cycle, affecting tax filings, financial statements, and business planning. Businesses choose fiscal year-end dates based on regulatory requirements and operational considerations.
By clearly defining the fiscal year in contracts, companies can ensure compliance, maintain consistency in financial reporting, and align accounting practices with their business needs.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.